Speculative activities continued to dominate the market movement. Further, the cautious sentiment among investors has limited the strategic moves and have thus kept the market calm overall. We have seen that companies’ disclosures and discussion panels held by some companies were key in supporting the activities on related stocks as it increased clarity regarding the performance of those companies. The MSM30 ended the week down by 0.35 per cent at 4759.65. All sub-indices closed down led by the Services Index (-1.51 per cent) then the Industrial Index (-0.84 per cent) and finally the Financial Index (-0.32 per cent). The Shariah Index closed down by 1 per cent.
In the weekly technical analysis, as we mentioned in our previous report, the MSM index is now limited and at any point of profit taking, which is already happen. The index dropped to 4,760 points, as mentioned last week. The level of 4,730 points a strong support for the index and if the index rebound will qualify, the index to reach 4,805 points while a break of 4,730 points will press the index to reach 4,680 points.
The announced Q1’18 initial net earnings updates indicate an increase of 25.9 per cent YoY at RO 155.46 million for companies whose first quarter ends on March. The main backup came from power companies, banks as well as other companies such as Renaissance Services and some investment companies. Sector wise, the Financial Sector net earnings registered an increase of 4.5 per cent YoY at RO 125.6 million, of which 77 per cent belongs to banks. The Service Sector net profit stood at RO 19.5 million against a net loss of RO 13.2 million in Q1’17 due to better performance by Renaissance Services and power companies. The Industrial Sector total net earnings declined by 27.6 per cent on annual basis to RO 11.9 million mainly pressurized by Raysut Cement, Voltamp Energy, Oman Cables Industry Co and Al Hassan Engineering.
All 8 listed banks of Oman have posted a combined operating income of RO 240 million (+6.2 per cent YoY; -6.7 per cent QoQ) in Q1’18. However, operating expenses outpaced income growth resulting in operating profit of RO 125 million (+5.4 per cent YoY; -11 per cent QoQ). The combined provision expense of banks, (excluding Ahli Bank, which has not disclosed its provision charge for the quarter) declined by 40 per cent YoY and 49 per cent QoQ. This decline in provisions has led to net profit of listed banks to increase by 10.5 per cent YoY and 8.5 per cent QoQ to RO 96.5 million. Within the 8 banks, Bank Muscat and Bank Nizwa posted QoQ declines and National Bank of Oman was the only bank which posted a YoY decline in its net profit for Q1’18.
The combined net loans (including Islamic Finance Assets) of all 8 banks reached RO 20.81 billion, +7.2 per cent YoY and +2.1 per cent QoQ. Within the banks, Alizz Islamic Bank and Ahli Bank increased their net loans the most at 10.1 per cent QoQ and 8.2 per cent QoQ during Q1’18. The combined customer deposits reached RO 19.74 billion, up by 4.2 per cent YoY and 4.0 per cent QoQ. Both loan and deposit growth were in line with our estimates. Loan to deposit ratio of the sector reached 105 per cent, down from 107 per cent but still above 103 per cent a year ago.
Insurance companies performance during Q1’18 was better than expected. Majority of the companies were able to post sizable growth in GWP and profit during Q1’18. Overall, insurance sector witnessed GWP growth of 12.6 per cent during Q1’18 while net income during the period went up by 23.0 per cent. Growth in income was witnessed despite abysmal performance of the equity markets, clearly indicating that the investment portfolios of many companies have moved towards fixed income from equities. Vision Insurance witnessed highest profit growth amongst its peers during Q1’18 while Oman Qatar Insurance witnessed the highest GWP growth amongst its comparable. Dhofar Insurance witnessed a turnaround from losses to profit. Al Ahlia Insurance registered decent growth. Company achieved 58 per cent of its estimated net income projections for 2018 in Q1’18. Oman Qatar Insurance GWP rose the most amongst all the insurance companies listed on MSM, however net income witnessed drop because of close to 70 per cent drop in investment income.
The MSM published a circular related to amendments to the disclosure policy of news uploading mechanism on MSM website. They include 1) the company shall state news disclosure in a formal sign and stamp letter, 2) disclosures shall be stated in both Arabic and English and 3) files should be in pdf format. The amendments will be effective from July 1 this year.
Locally, data published by the National Centre for Statistics and Information with respect to major importers of non-oil Omani exports showed that both the UAE and Saudi Arabia formed 37.9 per cent of total non-oil exports in 10M’17 at RO 985 million. China and India are also major importers of Omani non-oil exports as both of them formed 17.8 per cent of the total number. The value of total non-oil exports in 10M’17 stood at RO 2.6 billion, up by 28.2 per cent YoY on growth of exports to all countries within the export list.
Among the GCC financial markets, Saudi Stock Exchange was the best weekly performance as it closed up by 5.79 per cent followed by Qatar Exchange (+3.12 per cent) while Dubai Financial Market was the worst ending down by 0.4 per cent.
IMF reviewed its outlook for GCC. Many countries within the GCC went under the hammer and reported drop in growth estimates for 2018. Although no reason was sighted by IMF for reduction in estimates, we believe it would be largely based on IMF assumption that oil production cut would not continue in 2018, which is not the case as per the recent pact signed between Opec and Non-Opec Countries. Kuwait real GDP for 2018 is expected to decline by 2.82pps to 1.28 per cent from 4.10 per cent previously. Oman real GDP growth for 2018 was cut to 2.08 per cent from 3.74 per cent previously. Oman is expected to grow the most amongst GCC in 2019 with real GDP growth estimate of 4.17 per cent. UAE real GDP growth for 2018 was reduced to 1.96 per cent from 3.36 per cent, change of 1.40pps. Qatar went under the hammer as well. Its growth was reduced by 0.53pps to 2.57 per cent from 3.10 per cent previously for 2018. While IMF raised real GDP forecast for Saudi Arabia and Bahrain by 0.10pps and 1.28pps respectively. Saudi Arabia was already review few months before by IMF so they had an idea about production cuts to continue. While Bahrain might growth was probably raised because of new oil and gas discovery in the Kingdom.
(Courtesy: U-Capital)
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